CHEUNG HING v. ROTH & SONS ESTATES MANAGEMENT LTD

DCPI 181/2019

[2025] HKDC 166

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

PERSONAL INJURIES ACTION NO 181 OF 2019

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DECISION

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A.  Introduction

1.  This is the Court’s decision on TP1’s application by summons dated 5 June 2024 for variation of the costs order nisi at paragraph 65(2) of my Judgment dated 22 May 2024 (“Judgment”). The abbreviations in the Judgment are adopted herein.

2.  The costs order nisi was for the Defendant to pay TP1’s costs of the action, to be taxed on a party-and-party basis if not agreed. TP1 asks to vary the same to: “costs of this action including all previously reserved costs, on and before 13 May 2022 be paid by the Defendant to the 1^st Third Party, to be taxed if not agreed on a party-and-party basis; and costs of this action including all previously reserved costs, on and after 14 May 2022 be paid by the Defendant to the 1^st Third Party, to be taxed if not agreed on an indemnity basis with Certificate for counsel”.

3.  The Defendant agrees that TP1 should be entitled to certificate for counsel. It further accepts it should pay TP1’s costs on and after 14 May 2022 on a higher basis, as to which it proposes the common fund basis.

4.  The dispute is therefore whether the Defendant should pay TP1 her costs on and after 14 May 2022 on an indemnity basis or common fund basis.

5.  The first basis of TP1’s application is the Defendant’s failure to beat TP1’s Calderbank offers issued on 29 April 2022 (“First Offer”) and 18 May 2022 (“Second Offer”) respectively.[1]

6.  The second basis is that (according to TP1) the Defendant’s third party proceedings against her was wholly unmeritorious.

B.  Settlement Offers

7.  For completeness, I set out below the various settlement offers exchanged between the parties.

8.  By letter dated 6 December 2021, the Defendant demanded HK$200,000 (all inclusive) from TP1 in full and final settlement of its claim against her. There was no reply from TP1 and a follow-up letter was sent by the Defendant on 13 January 2022.

9.  By letter dated 29 April 2022, the Defendant reiterated the offer for payment of HK$200,000 by TP1.

10.  On the same day, by way of the First Offer, TP1 offered to accept the Defendant’s discontinuance of the third party proceedings against her, with 85% of her costs up to the date of the filing of a Notice of Discontinuance be paid by the Defendant to her on a party-and-party basis, and asked the Defendant to respond within 14 days (i.e. by 13 May 2022).

11.  Then, by way of the Second Offer, TP1 offered to accept the Defendant’s discontinuance of the third party proceedings against her, with 75% of her costs up to the date of the filing of a Notice of Discontinuance be paid by the Defendant to her on a party-and-party basis, and asked the Defendant to respond within 14 days.

12.  By letter dated 19 May 2022, the Defendant rejected TP1’s Second Offer, and counter-offered for TP1 to contribute HK$150,000 (all inclusive) to the Defendant in full and final settlement of its claim against her.

13.  By letter dated 20 July 2022, the Defendant made a further offer for TP1 to contribute HK$50,000 (all inclusive) to the Defendant in full and final settlement of its claim against her. This was rejected by TP1 on 16 August 2022.

14.  Then, by letter dated 10 October 2022, the Defendant reduced the amount for which it sought contribution from TP1 to HK$30,000. The offer was again rejected by TP1 on 19 October 2022.

15.  By letter dated 3 February 2023, the Defendant offered to waive any contribution from TP1 with no order as to costs in full and final settlement of its claim against her.

16.  By letter dated 17 May 2023, the Defendant again made the above “drop hands” offer to TP1.

C.  Legal Principles

17.  TP1 accepts that the First Offer and the Second Offer are not sanctioned offers within the meaning of O.22 of the Rules of the District Court (Cap 366H), as the O.22 regime does not apply to third party proceedings: Hong Kong Civil Procedure 2025 at paragraph 22/1/23.

18.  That said, a party who is in receipt of a reasonable settlement offer and who goes to trial having rejected that offer can be liable to a higher level of costs, if they do no better than the offer that has been rejected: Sam Sien San Albert v Sam Mo Yee [2019] HKCFI 1188 at paragraph 24 (DHCJ Paul Lam SC); Bright Gold Ltd v Mega Well Development Ltd [2019] 3 HKLRD 868 at paragraph 13 (A Chan J).

19.  A higher costs order should not be regarded as a penalty, but a means of achieving a fairer result for the payee: Bright Gold (supra) at paragraph 12.

20.  It is consonant with the underlying objectives enshrined in O.1A r.1 for the court to encourage dispute settlement, and therefore failure to respond constructively to a reasonable Calderbank offer, coupled with the subsequent failure to beat the offer, should weigh heavily against the offeree on costs: Bright Gold (supra) at paragraph 15.

21.  As to the award of indemnity costs:

(1)  In certain circumstances, costs may be awarded on a more generous than usual basis of taxation to achieve a fairer result.

(2)  It is for the receiving party to show that the case has some special or unusual feature.

(3)  Courts have rejected the proposition that an award of indemnity costs will only be made where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.

(4)  The discretion to order a more generous than usual basis of taxation is not to be fettered or circumscribed beyond the requirement that such taxation be ordered only when it is appropriate to do so.

(5)  What constitute appropriate circumstances to award indemnity costs must be fact-sensitive. The conduct of the party against whom indemnity costs are sought is cogently relevant. Thus, where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs.

(6)  In this regard, the threshold is high. The paying party’s conduct must be “unreasonable to a high degree”, and not merely wrong in hindsight.

See Commissioner of Inland Revenue v Poon Cho Ming, John (2020) 23 HKCFAR 74 paragraph 4 (Bokhary NPJ); Huge Dragon Corp Ltd v Lung Mun Oasis [2014] 3 HKLRD 286 paragraphs 12-13 (Poon J, as he then was); Heung Wing Yan v Hangway Housing Management Ltd (HCPI 347/2012, 14 February 2017) (DHCJ Marlene Ng, as she then was).

D.  Analysis

22.  First, I accept that both TP1 and the Defendant had engaged in bona fide settlement negotiations. While the Defendant did not accept the First Offer or the Second Offer, and its best offers were on a “drop hands” basis (as opposed to offering to pay for any of TP1’s costs), the situation remains rather different from cases where the party failing to beat the Calderbank offer failed to engage in any or any genuine negotiation (as in e.g. Bright Gold (supra) paragraph 14).

23.  Second, although the Defendant’s letter dated 11 July 2018 to the IO (“Letter”) was a pivotal piece of evidence (which was all along in the Defendant’s possession and undermines its case), it is fair to say that the trial also turned materially on the oral evidence of the Plaintiff, TP1 and TP2. Of note is that:

(1)  The witness statement of the Plaintiff, being the sole eye witness of the Accident, was prima facie in support of the Defendant’s case as to the cause of the Accident. It was only after the Plaintiff’s evidence was tested in cross-examination that the Court decided it was unable to accept the same for lack of clarity and consistency (see paragraph 39 of the Judgment).

(2)  The oral evidence of TP1 and TP2 as summarised in paragraph 23 of the Judgment, while supportive of TP1’s case, emerged only for the first time at trial. The Court expressed surprise at their omission from TP1 and TP2’s witness statements, but was prepared to accept them on the basis that they corroborated the Letter (see paragraph 42 of the Judgment).

24.  Therefore, viewing the matter objectively and without the benefit of hindsight, it cannot be said that the merits of the case were so clear-cut at the time when the First Offer or Second Offer was made as to make the Defendant’s continuation of the third party proceedings wholly unreasonable and unjustifiable.

25.  Third, I have not lost sight of TP1’s point that the Defendant only abandoned its claim for breach of the Deed of Mutual Covenant at the beginning of trial. Although the abandonment of this head of claim was very belated, it did save some time at trial.

26.  In all, while this Court considers that the Defendant’s failure to accept the First Offer and the Second Offer should attract a higher scale of costs, its conduct was not “unreasonable to a high degree” as to warrant costs on an indemnity basis.

27.  I therefore order that the costs order nisi at paragraph 65(2) of the Judgment be varied to as follows:

(1)  costs of this action including all previously reserved costs, on and before 13 May 2022 be paid by the Defendant to TP1, to be taxed if not agreed on a party-and-party basis; and

(2)  costs of this action including all previously reserved costs, on and after 14 May 2022 be paid by the Defendant to TP1, to be taxed if not agreed on a common fund basis with Certificate for counsel.

E.  Costs of this application

28.  By letter dated 23 May 2024, TP1 notified the Defendant of her intention to vary the costs order nisi to seek the costs of this action on and after 14 May 2022 on an indemnity basis, to be taxed if not agreed.

29.  By an undated letter (which was received by TP1 on 3 June 2024[2]), the Defendant offered to pay TP1 the costs of this action as from 14 May 2022 on a common fund basis, to be taxed if not agreed.

30.  By letter dated 4 June 2024, TP1 declined the Defendant’s offer.

31.  As the Defendant already conceded to pay the relevant costs on a common fund basis before TP1 took out her summons for variation, I take the view that the Defendant should get the costs of TP1’s application on a party-and-party basis, to be taxed if not agreed.